The US stock market plunged on Wednesday, dragged down by a sell-off in megacap technology stocks after disappointing earnings reports from Google’s parent company, Alphabet, and electric vehicle maker Tesla. A weak start to the megacap earnings season sparked concerns about the recent bull rally fueled by the artificial intelligence boom.
The Nasdaq Composite suffered its worst single-day performance in two years as key players stumbled after releasing second-quarter earnings. The tech-heavy index dropped more than 3%, losing over 650 points on Wednesday, marking its steepest decline in more than 400 trading days.
Alphabet's stock fell 5% despite posting financial figures that surpassed forecasts for both revenue and earnings. Tesla, however, dropped 13% after reporting a 45% year-over-year decline in profit.
This likely triggered a chain reaction across tech stocks. Nvidia and Meta Platforms lost 6.8% and 5.6%, respectively, while Microsoft stock slid 3.6%. The high-flying and volatile group known as the Magnificent Seven saw its combined market value decrease by $768 billion by the closing bell.
Wednesday's negative reaction to the results has heightened concerns about the ability of megacap stocks to deliver strong performance. Even robust results next week from Apple, Amazon, and other tech giants may not be well-received by Wall Street.
The sell-off extended beyond the Nasdaq, leaving investors with nowhere to hide. The broad-based S&P 500 fell 2.3%, and the Dow Jones Industrial Average lost 1.2%, or 504 points. This sharp decline has sparked fears that investors may have been overly optimistic about the potential returns from artificial intelligence and the impact of new tech on the market.
